Tuesday, December 27, 2011

How does everyone like reading about Nancy Pelosi taking her vacation at a $10,000/night place in Hawaii? She purports to defend the well-being of the poor and needy, but in reality she is a reverse Robin Hood: she uses her power to take from the Taxpayers and give to her family and wealthy supporters. I can't wait until she finally drops dead.

I have a feeling the fears people have about the Mayan calendar prophecies will be unfounded. HOWEVER, everyone should have a lot of fear over what is coming our way economically and politically. The MF Global disaster and all of the fraud, corruption and Government enablement connected with that event should have people scrambling for physical gold and silver and making sure their weapons are well-oiled and easily accessible.

I want to say that gold and silver are setting up for a big move higher in 2012. Again, the reasons underlying this move are the kinds of things that we can actually touch, feel and see - as opposed to the voo doo of the Mayan warnings. One of the big drivers of gold going forward will be the accelerating accumulation by China - it's Central Bank and the population. In fact, just today a senior official of the PBOC (China's Central Bank) made a statement urging the Government to increase its gold holdings on price declines:

The Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimize its foreign-exchange portfolio and purchase gold assets when the gold price shows a favorable fluctuation LINK

There are several other factors that lead me to conclude that the metals are getting ready to move a lot higher. Not the least of which is the fact that the net short position in Comex silver futures of the bullion banks in silver is at a low level not seen since 2001. As those of you who follow the COT report on a weekly basis know, when the big banks cover their shorts and increase their net long positions, it always leads to a big move higher:

(click on chart to enlarge)

In addition, the sentiment levels in silver are a low as they were back in October 2008 at the lows of the last big, painful correction. The sentiment indicator is one of the best indicators I know of in predicting the next move in the metals, especially at points of extreme readings. I also know of some precious metals investors who are new to the game over the last couple of years who are throwing in the towel and moving back into cash. This is something that makes absolutely no sense to me, especially given that we know for a fact that the Fed/Bernanke/Geithner are engaged in devaluing the U.S. dollar on a daily basis. Of course, weaker-handed investors who exit are typically my number one contrarian indicator, COT reports notwithstanding.

One more point of note: the bottom of the last major correction in precious metals - October 2008 - also happened to precede the first massive round of money printing and Government bailouts. I would argue that - given what we know about the financial condition of the Treasury, declining tax revenues, bigger Government expenditures than budgeted just 3 months ago and collapsing bank balance sheets - we are on the cusp of another big round of QE. I don't know exactly when it will come and what form it will take, but it is coming. I would suggest that this is the reason that the big bullion banks are covering up their short positions and Fed is working overtime to keep a lid on the metals.

The last indicator that I wanted to point out - one that is over and above the obvious indicators - is the Austrian True Money Supply graph. This metric measures the true supply of cash that is readily available in the financial system and is subject to less manipulation and more transparency than some of the other usual metrics. You can read about it HERE

(click on chart to enlarge)

This chart is telling me that I should be fearful of inflation in 2012. I will point out that the prime rib I purchased last December for $35 cost me $60 this year (roughly same weight, same store). So the next time Bernanke or Geithner try to tell you there's no inflation in the system you can tell them to shove it up their ass by adding to your physical gold and silver holdings. This chart is not something you will find on CNBC, CNN, Bloomberg, Fox News, Fox Business or in your local newspaper. But this chart tells me that gold and silver are getting ready to make a big move.

As I write this, a lot of investors whom I know personally—who are sophisticated, wealthy, and not at all the paranoid type—are quietly pulling their money out of all brokerage firms, all banks, all equity firms. They are quietly trading out of their paper assets and going into the actual, physical asset.

Note that they’re not trading into the asset—they’re simply exchanging their paper-asset for the real thing.

Keep posting your fears - they fuel my conviction that I'm right about contrarian sentiment even more. It's easy to say "hey man, buy when there's blood in the street," until you are looking through the blood in your own eyes, then you run in fear. I'm seeing blood in the street and I'm adding to positions.

Ackerman is never right about the metals. He uses some goofy technical indicator that never works.

If you think the landscape is getting better read this...long gold, silver, and you might put a bid in for rope?

The Big Lie

As 2011 slithers to its end, none of the major problems that led to the crisispoint three years ago have really been solved. Bank balance sheets stillreek. Europe day by day becomes a financial black hole, with matterfrom the periphery being sucked toward the center until the vortexitself collapses. The Street and its ministries of propaganda havefallen back on a Big Lie as old as capitalism itself: that all that hasgone wrong has been government’s fault. This time, however, I don’tthink the argument that “Washington ate my homework” is going to work.This time, a firestorm is going to explode about the Street’s head—andabout time, too.

Over the next year, I expect the “what” will give way to the “how” in the broad electorate’s comprehension of the financial situation. The 99 percent must learn to differentiate the bloodsuckers and rent-extractors from those in the 1 percent who make the world a better, more just place to live. Once people realize how Wall Street made its pile, understand how financiers get rich, what it is that they actually do, the time will become ripe for someone to gather the spreading ripples of anger and perplexity into a focused tsunami of retribution. To make the bastards pay, properly, for the grief and woe they have caused. Perhaps not to the extent proposed by H. L. Mencken, who wrote that when a bank fails, the first order of business should be to hang its board of directors, but in a manner in which the pain is proportionate to the collateral damage. Possibly an excess-profits tax retroactive to 2007, or some form of “Tobin tax” on transactions, or a wealth tax. The era of money for nothing will be over.

But it won’t just end with taxes. When the great day comes, Wall Street will pray for another Pecora, because compared with the rough beast now beginning to strain at the leash, Pecora will look like Phil Gramm. Humiliation and ridicule, even financial penalties, will be the least of the Street’s tribulations. There will be prosecutions and show trials. There will be violence, mark my words. Houses burnt, property defaced. I just hope that this time the mob targets the right people in Wall Street and in Washington. (How does a right-thinking Christian go about asking Santa for Mitch McConnell’s head under the Christmas tree?) There will be kleptocrats who threaten to take themselves elsewhere if their demands on jurisdictions and tax breaks aren’t met, and I say let ’em go!

Gosh, I was so worried today that I took X MAS money and bought 15 oz silver and 1/2 oz. gold today.

Soon the world will solve the world's insolvency by some Deus Ex Machina miracle and render gold and silver essentially worthless. That's the biggest fairy tale out there- keep believing that crap. It is impossible to change the fundamentals which continue to deteriorate.

And everywhere, this year of mass defiance wrong-footed those who were supposed to be in the know. The experts had thought the Arabs were getting richer and were too scared of their autocrats, that the Russians were apathetic and quite liked their neo-czar, that the Indian middle class was politically disengaged, that West Europeans were too old for outrage, that Americans didn’t care about the class divide and that the Chinese comrades were too effective at suppressing dissent.

But everywhere, the conventional wisdom was turned upside down by people who turned out to be angrier than their elites had suspected, and better able to channel that dissatisfaction into mass protest and even revolution.

The first surprise was the strength and near universality of the public discontent. Like Tolstoy’s unhappy families, the motivations of protesters in each country were unique. But there was a common thread to the uprisings and a common reason why the elites were taken by surprise.

The unifying complaint is crony capitalism.

But the notion that the rules of the economic game are rigged to benefit the elites at the expense of the middle class has had remarkable resonance this year around the world and across the political spectrum. Could the failure of the experts to anticipate this anger be connected to the fact that the analysts are usually part of the 1 percent, or at least the 10 percent, at the top?

The second surprise was how easy it has become to transform mass dissatisfaction into mass protest. That was true both in chillingly repressive regimes and in ones where the hurdle to collective action had been thought to be public apathy.

Ron Paul Did Not "Walk Out" of CNN Interview; Blatantly Biased Headline by Time Magazine; Six Reasons to Vote for Paul

Fair to Say?!

It's certainly not fair to make that claim. Can I see a poll please? Moreover, Libertarians do not hold the racial beliefs stated by David Frum.

If someone wants to talk about ethics, it's just as easy for me to claim "It's fair to say the vast majority of those following the Paul story understand that CNN writers like Gloria Borger, David Frum, and Wolf Blitzer do not care about the news, they only care about generating sensational headlines, any way they can. Moreover, CNN openly support wars, regardless of the ethics of war, because war is good for ratings."

I do believe that's "fair to say", although like David Frum I do not have a poll to prove it.

While on the theme of "fair to say" I would like to point out this comment made by "EasyRhino" to Frum on the CNN blog: "Keep in mind Frum is a 5 star chicken hawk who defended the invasion of Iraq and advocates regime change in Iran and Syria, everything Paul is against."

Contact CNN

I might also point out that it's "fair to say" the CNN writers must be cowards because they do not have a direct way to contact them via email.

You can however, Send a General Email to CNN and let them know what you think of their reporting. Six Reasons to Vote for Paul

Paul is the only one for a balanced budget and a plan to get there the only one who would bring US troops home immediately the only one who would end the Fed the only one who believes in the free market the only one who believes gold should be money the only one who would dismantle entire government departments

Does anyone here think that the Fraud in Chief has the balls to ask for another debt ceiling increase before the end of this year, even though the last one was suppose to be enough until the end of next year? Anyone?

Between corporate sponsorship and pretty big paychecks, are news anchors and their networks really offering up a fair take on what’s at stake? Georgetown University’s Chris Chambers talks to us about how the mainstream media sneaks slants into their broadcast and brings a bias to the big stories.

But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer’s money to be stolen so as to make JPMorgan whole.

—in short, ordinary investors. Ordinary people—and they got screwed by the regulators, for the sake of protecting JPMorgan and other big fry who had exposure to MF Global.

That, in a nutshell, is what happened.

“The MF Global scandal has made it clear that the integrity of the system has disappeared,” said a good friend of mine, Tuur Demeester, who runs Macrotrends, a Dutch-language newsletter out of Brugge. “The banks are insolvent, the governments are insolvent, and all that’s left is for the people to realize what’s going on—and that will start a panic.”

He hit it on the head: Some of the more sophisticated people—like Tuur, like some of my acquaintances, (like myself, frankly)—have realized that the MF Global scandal means that there is no safety for any paper investment: The integrity of the systems has been completely shattered. If in the face of one medium-sized brokerage firm going under, the regulators will openly allow ordinary people to be ripped off for the sake of protecting the so-called “Systemically Important Financial Institutions”—in this case JPMorgan—what will happen if there is a system-wide run? What if two or three MF Globals happen simultaneously?

Will they protect the citizens’ money? Or will they protect the “Systemically Important Financial Institutions”?

Armstrong called it..What is at stake now is exposing the political corruption ofthe New York media, courts, Justice Department, Commodity FuturesTrading Commission, Securities Exchange Commission, and politicalprocess has come together in such a way that the fate of the nation istruly hanging in the balance. Why do I make such a bold statement? Thefailure of the clearing houses to step up and honor the trades isdevastating. The conduct of the SEC and CFTC is despicable and how canyou place ANYONE at the helm of either “regulator” who would EVER bein a position to have to recuse himself as the Commodity FuturesTrading Commission’s chairman, Gary Gensler has done for beingex-Goldman Sachs?

SEE...MF Global trustee has no conflict of interest: judge(Reuters) - The trustee liquidating MF Global's (MFGLQ.PK) brokerage does not have a conflict of interest stemming from prior work done for one of MF Global's key lenders, a bankruptcy judge said on Tuesday.

Trustee James Giddens and his law firm, Hughes Hubbard & Reed, are sufficiently "disinterested," Judge Martin Glenn said in a ruling in U.S. Bankruptcy Court in Manhattan.

The ruling came in response to accusations from some customers that past work done by the firm for JPMorgan Chase & Co (JPM.N), one of MF Global's main lenders, constituted a conflict of interest.

After reports surfaced that BNY Mellon was under investigation, executives were torn over how to deal with inquiries from customers demanding to know if they had been overcharged, Mr. Wilson told prosecutors in May 2010. He told prosecutors that Mr. Mahoney "wants to tell them to 'go pound sand,' " but another executive who was "afraid of upsetting custody clients" disagreed.

The documents reveal that at least one other former BNY Mellon employee has offered to help prosecutors build their case against the bank. The salesperson told the Florida attorney general in a letter earlier this year that he could describe how he had been "trained in committing fraud using various strategies."

[Ed Note: The pathetic Larry Kudlow shows his true establishment colors in this concerted effort to smear Ron Paul, just as his corporate masters demand. What does this clip reveal? That Larry Kudlow doesn't give a crap about the Republic. Shameful.]

It gets even worse in the derivatives markets, where banks routinely overcharge state and local governments for things like interest rate swaps, for one very obvious reason – swaps are not traded on open exchanges, so only the banks know how to price them.

Imagine what NFL gambling would be like if the casinos didn’t publish the point spreads every week, and you’ll get a rough idea of how the swap market works. If you couldn’t look it up, how many points would you give the Dolphins against the Jets next week? Two? Five? Seven? The big casinos know, because they’re taking all that action, that the real number is one point.

In the same vein, exactly how accurately do you think some local county treasurer might be able to guess the cost of an interest rate swap for his local school system? Answer: he’d probably do about as well as you or I would, guessing the odds on a Croatian soccer match.

The big banks know this, which is why there should never, ever be non-competitive bids for those sorts of financial services. In a sole-source contract for a swap deal, you’re trusting a (probably corrupt) Too-Big-To-Fail bank to give you a good deal for a product whose price is not publicly listed anywhere.

Dave, what about using the excess reserves currently sitting with the US Banks? Banks buy USG debt from Fed, banks use debt as collateral, get cash, buy more USG Debt...keep the loop going until USG debt funded...

The benefit for the fed maybe there is no announcement of QE3...i know, distinction without a difference, but fed likely can sell notion to the public ie. non-inflationary, nothing to see, fed's ok...bullish but might take the market sometime to figure it out...

problem for the fed is a lot of these excess reserves sitting at the Fed would then enter and circulate into the economy...other problem is with these excess reserves drawn down, causes two problems, the latter of which might be more significant: a) official QE3 is guaranteed in 2013 since there likely is nowhere else to look to fund USG debt b) presuming unexpected bank runs, would lead to shortage of printed dollars - the excess reserves sit there nicely that could be used in such an event to calm the waters before the real storm...

The excess reserves are printed up money that have not circulated into the system yet. Unleash those and we will see a massive uptick in inflation. But those can't be used because that is what is keeping the banks from collapsing.

During two days of recent congressional hearings into how as much as $1.2 billion disappeared from MF Global customer accounts, the chief operating officer of the imploding investment firm responded again and again that he did not know.

Yet as the House and Senate interrogated Bradley I. Abelow and other top executives at MF Global Holdings Ltd., lawmakers did not mention Mr. Abelow’s role as a financial adviser for the Environmental Protection Agency, which as of Tuesday listed him as the chairman of its financial advisory board.

Even as he finds himself the public face of a bankruptcy and admitted to lawmakers that he had no idea how client funds disappeared, Congress and the administration have voiced no public concern about Mr. Abelow’s role advising the $8.6 billion government agency on its finances.

He has ties to EPA Administrator Lisa Jackson through former New Jersey Gov. Jon Corzine. Each served at different times as the governor’s chief of staff. When Mr. Corzine lost his bid for re-election and later joined MF Global, Mr. Abelow followed.

Jim Rogers’ Outlook For 2012 & Beyond Explains why he moved to Singapore (likes China, but Bejing & Shanghai too polluted) He’s short stocks “across the world” Long commodities Long gold, silver Crisis still imminent, better to take the hit now

First it was Zero Hedge. Then Ron Paul joined in. Now it is the turnof a former Dallas Fed Vice President, Gerald ODriscoll, to outrightaccuse the Fed of bailing out Europe courtesy of "incomprehensible"currency swaps, and implicitly accusing Bernanke of lying that hewould not bail out Europe even as he has done precisely that. And notonly that: by cutting the USD swap spread from OIS+100 to OIS+50, theFed has made sure it gets paid less than ever for extended Europe thecourtesy of bailing it out all over again. Incidentally, O'Driscollsays, "America's central bank, the Federal Reserve, is engaged in abailout ofEuropean banks. Surprisingly, its operation is largely unnoticedhere." One thing we can say proudly - it has been noticed loud andclear here...

Bill Black: What if the SEC investigated Banks the way it is investigating Mutual Funds?

The Wall Street Journal ran a story yesterday (12/27/11) entitled “SEC Ups Its Game to Identify Rogue Firms.” “Rogue” is an interesting word with a range of definitions. When it is used as an adjective its meaning is: “a playfully mischievous person; scamp.” The trivialization of the most destructive elite frauds is one of the most common forms of what criminologists call “neutralization” of the moral content of wrong doing. Neutralization increases crime.The actual story makes it clear that the criminals that the SEC was identifying were not “rogues.” They were the CEOs of seemingly legitimate firms. The SEC is identifying “accounting control frauds” – the frauds that cause greater financial losses than all other forms of property crime combined. The SEC is not identifying a few rotten apples, but roughly 100 hedge funds likely to have engaged in accounting fraud.

The SEC should be applauded for finally understanding that “if it’s too good to be true; it probably isn’t true.” The most interesting aspects of the WSJ story, however, are two unexamined topics that should have been central to the story. First, there is not a word in the article about criminal prosecutions for the frauds the SEC has identified. The frauds, as described in the article, are so blatant that they would make relatively simple to prosecute. There is no indication that the SEC wanted the WSJ to know that they had made well over a hundred criminal referrals against hedge fund CEOs and senior officers. There is no indication that the WSJ reporters were interested in whether the SEC had made criminal referrals against these moderately elite felons. As a result, we have no information on whether the SEC has in fact made hundreds of criminal referrals against the senior officers at the hedge funds that they have identified as having engaged in likely fraud. Indeed, we have no evidence that they have made any criminal referrals. Neither the SEC nor the WSJ reporters indicated that any prosecutions, or even Department of Justice investigations, resulted from the SEC hedge fund investigations.http://www.nakedcapitalism.com/2011/12/bill-black-what-if-the-sec-investigated-banks-the-way-it-is-investigating-mutual-funds.html

Eric Arthur Blair aka George Orwell

"Hope" is not a valid investment strategy

Full Time Jobs Over Last 5 Years

Is Your Gold Missing?

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Epic Quote - "Jesse" Sent This To Me

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous

The Basic Fundamental Problem

What's the solution?

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881- 1973)

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie? JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

Priceless Quote From Richard Russell

On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.

Quote of the Month

And very relevant in the context of yesterday's post about gold moving higher against all fiat currencies:

Just imagine what would happen if a mere ten percent of the money currently going into bonds were instead to go into gold. As in 1972, the real move has yet to begin.

- Murray Pollit, Pollit & Co.

A Picture Says It All...

www.moneyandmarkets.com

Golden ore samples produced by Eurasian Minerals

Undisclosed exploration site

The Next Reserve Currency?

1 oz. Chinese Panda

Guess who said this?

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.

-Alan Greenspan, 9 Sep 2009

THIS is what REAL money looks like

1 oz. Gold Eagles

Alan Greenspan said what?

“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan

About Me

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance.
Currently I co-manage a precious metals and mining stock investment fund in Denver.
My goal is to help people understand and analyze what is really going on in our financial system and economy.